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YieldBoost AIMC From 1.5% To 9.4% Using Options

Shareholders of Altra Industrial Motion Corp looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the April 2015 covered call at the $35 strike and collect the premium based on the $1.55 bid, which annualizes to an additional 7.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.4% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but AIMC shares would have to advance 7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.

Shareholders of Altra Industrial Motion Corp ( AIMC) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the April 2015 covered call at the $35 strike and collect the premium based on the $1.55 bid, which annualizes to an additional 7.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.4% annualized rate in the scenario where the stock is not called away. Any upside above $35 would be lost if the stock rises there and is called away, but AIMC shares would have to advance 7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Altra Industrial Motion Corp, looking at the dividend history chart for AIMC below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.5% annualized dividend yield.

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the April 2015 covered call at the $35 strike gives good reward for the risk of having given away the upside beyond $35. ( Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Altra Industrial Motion Corp (considering the last 252 trading day closing values as well as today's price of $32.61) to be 26%. For other call options contract ideas at the various different available expirations, visit the AIMC Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Thursday, the put volume among S&P 500 components was 519,159 contracts, with call volume at 931,769, for a put:call ratio of 0.56 so far for the day. Compared to the long-term median put:call ratio of .65, that represents high call volume relative to puts; in other words, buyers are showing a preference for calls in options trading so far today. Find out which 15 call and put options traders are talking about today.

The DividendRank formula at Dividend Channel ranks a coverage universe of thousands of dividend stocks, according to a proprietary formula designed to identify those stocks that combine two important characteristics — strong fundamentals and a valuation that looks inexpensive. Altra Industrial Motion Corp presently has an above average rank, in the top 50% of the coverage universe, which suggests it is among the top most "interesting" ideas that merit further research by investors.

The DividendRank formula at Dividend Channel ranks a coverage universe of thousands of dividend stocks, according to a proprietary formula designed to identify those stocks that combine two important characteristics — strong fundamentals and a valuation that looks inexpensive. Altra Industrial Motion Corp presently has an above average rank, in the top 50% of the coverage universe, which suggests it is among the top most "interesting" ideas that merit further research by investors.

The most recent short interest data has been released by the NASDAQ for the 11/28/2014 settlement date, which shows a 320,962 share increase in total short interest for Altra Industrial Motion Corp , to 2,743,691, an increase of 13.25% since 11/14/2014. Total short interest is just one way to look at short data; another metric that we here at Dividend Channel find particularly useful is the "days to cover" metric because it considers both the total shares short and the average daily volume of shares traded.